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All Da King's Men

Working For A Living

By David King Published: December 7, 2013

First, a bit of positive news. The Gross Domestic Product (GDP) of the United States grew 3.6% in the third quarter. The less good news is that GDP growth came primarily from inventory buildups, not consumer demand. We'll see if fourth quarter consumer demand (aka, Christmas ?) justifies the inventory growth. It may interest you to look at a modern history of annual U.S. GDP growth, which can be found here. My takeaway from the chart is - we have yet to experience a real recovery from the last recession. GDP growth has been relatively weak ever since. If you compare the current weak recovery to the real recovery that began in 1983 following our last serious recession, you'll see a stark difference.

To emphasize the weakness of this recovery, we still have 1.5 million fewer jobs than we had in 2008. What's even worse is, lots of the jobs that have been created are part time. Consider this chart:

From this, we see that full time jobs are down about about 3.6 million since the beginning of 2008, while part time jobs are way up above historical norms. This chart alone goes a long way toward explaining why the median income of Americans has dropped for five years in a row. If you work for a living, as most people do, you know things have not gotten better. They've gotten worse.

Something curious and atypical is happening. The stock market has risen to a new high due to record low interest rates and injections of so-called "liquidity" from the Fed (which means the stock market actually represents a bubble as opposed to real organic growth, in my opinion). S&P companies are experiencing profits from the very evisceration of the labor base just described. This point is further illustrated in chart #2, which shows that employee compensation as a percentage of GDP is at the lowest level ever recorded:

 

Can you say "income inequality" ? As you can see from this chart, employee compensation has been declining relative to GDP since 1970. Not exactly a new phenomenon, but it's worse now than ever before. Perhaps this is what the Pope was referring to when when he spoke of the "new tyranny" of the markets, where wealth is not shared.

The question is, how do we fix it ? I have my own answers to that question, some of which I have shared in the past, but I'll refrain for now. President Obama has proposed raising the minimum wage, which I consider to be a marginal proposition that doesn't deal with the real problem, but I'd like to hear your answers.

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